A podcast by Daniel Shvartsman and Akram's Razor
I have concerns about the dumbed-down version of Peter Lynch style investing, which often gets translated in 'invest in what you love' without any further elaboration. Lynch himself cited the 'what you love' as an opening point to do more research and to understand the market, not an end point. I find it difficult to trust that what I or the people around me see and think in their day to day lives is truly representative or that it extrapolates to a wider market. That's where the financials, due diligence, and research comes in.
I do believe in the idea of following stocks you are interested in, though. It becomes easier to do all the research and due diligence if you understand or want to learn more about a given sector. I invest in a lot of travel-related stocks for that reason, for example.
Stitch Fix (NASDAQ:SFIX) is the other prominent example in my portfolio of a stock I enjoy following from a consumer and business analyst perspective, before considering potential returns. I like the data meets human touch model, I enjoy the product as a consumer, and I find the growth story intriguing. It's never been a big position for me, but I have allocated an outsized percent of my time thinking and reading about it.
Stitch Fix is still in the roller coaster phase of its public career, with the pandemic effects for the company being acute and contradictory. It had to shut down distribution centers and saw their first quarter over quarter active clients decline as a public company as a result; then they acquired new clients at their fastest clip in a long time, while boasting a strong FY Q1 report; this and high short interest sent shares from the $30s to the $50s, which then extended to the $110s (!) in the GameStop (GME) frenzy; after the air came out of that rally, the company posted a weaker FY Q2, which they said was a result of shipping backlogs; and then, after all that, co-founder and CEO Katrina Lake announced she would step down from the CEO role in August to stay on as executive chairperson and an employee focused on social impact.
So for this week's episode of The Razor's Edge, Akram's Razor and I walk through my bull case, such as it is, and all of these issues. I may not be the most eloquent or bullish investor in the stock, and I won't be adding to my small position at these prices (yet, anyway). Still, I think the discussion will be of interest both for Stitch Fix investors/observers and as a way - with Akram's effective cross-examination - to think through an investment thesis. Click play above to have a listen.
Topics Covered
- 2:45 minute mark – Daniel’s SFIX elevator pitch
- 6:00 – How to peg a valuation for a unique approach
- 12:00 – The value proposition and the edge
- 20:00 – Using (or misusing) the Netflix parallel
- 26:00 – Advantages from the back end side
- 34:00 – Is this changing the game in apparel
- 43:00 – The competitive threats that might come into play
- 49:30 – What to make of Lake stepping down and final notes
